JP Morgan scandal deepens American distrust in financial institutions

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The Securities and Exchange Commission (SEC) alongside the Department of Justice (DOJ) reached a settlement with JP Morgan on Nov. 17 regarding the company’s nonconformity with the Foreign Corrupt Practices Act. This law prohibits companies from giving “anything of value” to foreign officials in exchange for business. In the case of JP Morgan, the company was charged with hiring children of Chinese elites to secure business opportunities.

A day before the settlement was reached, Associate Professor of Political Science & International Relations Zhiqun Zhu gave a talk titled “Why Is There No Color Revolution in China?” in which he detailed the composition of the ruling Communist Party of China. Zhu noted that about 40 percent of the party consists of people involved in business, ironically including many members of the Chinese elite with whom JP Morgan was involved. This key portion of the party represents how closely tied business and politics are in China.

JP Morgan’s illegal practice was a formal program the company ran called “Sons and Daughters,” which offered internships and positions within the company to children of the Chinese elite. JP Morgan did not appear to hide the bribery well, keeping spreadsheets tracking how often new hires created business deals in addition to many blatant bribe-related emails.

“They are close to mandating banks for their IPO. We are a strong contender. Blink blink nod nod, can we find a place for his son?” one senior investment banker said, leaving little to the imagination regarding his intentions.

This program hired around 100 employees and interns and made the company over $100 million. The investigation of JP Morgan was sparked by concerns surrounding bribery within the company by the SEC and the DOJ back in 2013.

Since the settlement, JP Morgan has taken action against individuals involved and remained compliant with the ongoing investigations by the SEC. The company agrees that the hiring practices under this program were “unacceptable.” Unfortunately, this obvious case of corruption further tarnishes the image of major financial institutions in the United States and creates greater distrust among Americans. Wall Street and big banks have dealt with multiple corruption scandals over the years, but banking misbehavior seems to occur more frequently in recent years, causing a huge credibility problem for the industry as a whole.